The Securities Exchange Board of India (“SEBI”), has issued Guidelines for Strengthening Industry Standards for Issuer Companies, Registrar & Transfer Agent to an Issue (“RTAs”) , Depositories, Banker to an Issue and Stock Exchanges by a circular dated 20th April 2018 broadly covering the following areas:

1. Payment of Dividend/interest/redemption;
2. Transfer/transmission/correction of errors and
3. Compulsory Internal Audit of the RTAs.

Background

SEBI had earlier constituted a committee on strengthening the guidelines and raising industry standards for RTAs. With the objective to strengthen the process of handling and maintenance of records, transfer of securities, payment of dividends, interest, redemption by RTAs, Issuer Companies and Bankers to Issue, the committee made recommendations basis which the guidelines were framed.

The Guidelines issued through the present Circular shall be effective with immediate effect except where specific timelines have been stipulated.

Key Highlights

1. Provisions with regard to Payment of Dividend/Interest/Redemption

• Dividend/Interest/Redemption Master Data File containing details for each dividend/interest/redemption paid shall be maintained by the Bank and the same shall be reconciled by the RTA and the Issuer Company.
• Issuer Company, RTA and the dividend/interest/redemption processing Bank shall ensure that the Banks provide reconciliation of the paid and unpaid details of the dividend/interest/redemption paid fortnightly during the initial validity of the instrument and after the expiry of such validity, on a quarterly basis till transfer of funds to Investor Education and Protection Fund.

2. Provisions regarding Transfer/transmission/Correction of Errors etc.

• RTAs and Issuer Companies shall ensure that a folio once allotted to a person should never be re-allotted to any other person under any circumstances
• RTAs and Issuer Companies shall ensure that history of all transactions in a folio are linked to a particular folio for easy retrieval.
• RTAs and Issuer Companies shall ensure that all updation in the folio records shall be enabled only through front end modules
• Issuer Company to obtain certified soft copies of Members data and Register of Debenture holders on a quarterly basis from the respective RTAs.
• Issuer Company to ensure that every return filed with RoC and any document related to company’s securities processed and compiled by RTAs to be maintained by the RTAs. Copy of such return shall be forwarded to the Issuer Company by the RTA.

3. Compulsory Internal Audit of RTAs

• RTAs to ensure that they carry out internal audit on annual basis by independent qualified Chartered Accountants or Company Secretaries or Cost and Management Accountants and Certified Information Systems Auditor (CISA) who don’t have any conflict of interest. 

All records of transactions referred above under point 1 and 2 and in the Principal Guideline shall be required to be maintained for period of eight years by the concerned entities from the date of the transaction. It has been clarified that where the share transfer agent activities are carried out in-house, the Issuing Companies, shall ensure compliances as applicable to the RTAs under the present Guidelines.

For details on the Guidelines, please click on the hyperlink below.

Source: SEBI Circular

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